G00259238

The CIO's Role in Executing Enterprise

Strategy
Published: 21 November 2013

Analyst(s): Colleen M. Young

Experts estimate that only 10% of enterprises successfully execute against

their strategies. For the rest, this shortcoming is often the CIO's problem to
solve. This research provides best practices for CIOs looking to more
effectively engage business leaders and influence enterprise success.

Key Challenges
■ Approximately 90% of enterprises fail to execute against their strategies; the dismal track
record behind strategy execution is not a failure of the strategies themselves, but of enterprise-
level program management (EPM).
■ EPM requires effective governance and investment portfolio management — disciplines many
enterprise leaders view as a constraint on their autonomy and/or a waste of their time.
■ Immature governance and investment portfolio rationalization practices have a trickle-down
effect on IT, which is the common dependency across most initiatives.
■ Program and project portfolios that exceed IT capacity are symptomatic of this issue, a problem
most business leaders consider IT's problem to solve.
■ CIOs have no choice but to develop the leadership competencies, investment and program
management capabilities to bridge the chasm of disinterest responsible for poor execution. No
one will do it for them.

Recommendations
CIOs should:

■ Make governance participation worthwhile.

■ Assume the mantle of leadership.
■ Confirm strategic intent and leading performance indicators.
■ Identify IT's involvement and how it potentially impacts the business.
 ■ Socialize IT's strategic response with all key stakeholders.
■ Encourage the establishment of an enterprise program management office.

Table of Contents

Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 4
Make Governance Participation Worthwhile...................................................................................... 4
Assume the Mantle of Leadership.....................................................................................................5
Confirm Strategic Intent and Leading Performance Indicators...........................................................7
Identify IT's Involvement and How It Potentially Impacts the Business...............................................7
Socialize........................................................................................................................................... 8
Case Study............................................................................................................................................ 9
Gartner Recommended Reading............................................................................................................ 9

List of Figures

Figure 1. CIO Leadership Domains......................................................................................................... 3

Figure 2. A Simple, Initial Approach to Investment Portfolio Management............................................... 5
Figure 3. Hallmark's Approach to Identifying IT's Strategic Impacts and Dependencies.......................... 6
Figure 4. The Failure of Cascaded Strategies..........................................................................................8

Introduction
Two of the most common issues CIOs face are the disinclination of business leaders to participate
in IT governance and project demand that exceeds IT resourcing. These issues are two sides of the
same coin and are symptomatic of an enterprise that does not understand how to do enterprise-
level investment portfolio management and program management.

The lack of enterprise investment portfolio and program management manifests in a failure to
execute against business strategy. Thus, it is in everyone's interest — IT leader and business leader
alike — to resolve the gap. Unfortunately, many business leaders resist such decision making at the
enterprise level for fear it will negatively impact their autonomy. They are perfectly content to make
a lack of enterprise-level prioritization, resource allocation and execution accountability IT's problem
to solve. CIOs, in turn, resist putting themselves forward to offer a solution. They fear they'll be
perceived as trying to dictate business practice to business leaders, or they walk away from the
problem, believing that, if the business doesn't care, they needn't either. While understandable,
such attitudes on the part of the CIO are counterproductive.

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 CIOs who play a constructive role in helping the enterprise bridge strategic planning and execution
are accepted as vital enterprise leaders and have a degree of influence that actually helps the
enterprise gain more benefit and value from IT. CIOs who do not play such a role are perceived as
order takers. They not only run the risk of increased marginalization, but also bear some
responsibility for the enterprise's failure as a whole to execute and for dampening the realized value
of IT.

The CIO who assumes a leadership role in maturing enterprise investment portfolio and program
management creates a win-win situation for both IT and the business. The question then becomes
how to make it happen in an environment that is often complicated by IT's general lack of
credibility.

Figure 1 illustrates the primary leadership domains CIOs must exercise in order to successfully
execute against strategy. The focus of this piece is on those planning domains that bridge
enterprise strategy and its actual execution — the focus here is not on the execution itself. Those
planning domains are governance, investment portfolio management, enterprise program
management and enterprise architecture.

Figure 1. CIO Leadership Domains

Governance

Portfolio Project
Mgmt. Mgmt.

Enterprise
Strategy

Enterprise IT Service
Architecture Program Management
Mgmt.

Source: Gartner (November 2013)

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 Analysis
Make Governance Participation Worthwhile
There is no real incentive in most enterprises for business leaders to address the lack of governance
capability in investment and program management, as most regard it as a constraint on their own
flexibility. They are disinclined to make IT's life easier at their own expense. For them, solving this
problem is a zero-sum game, and it's simply not going to happen. CIOs must make participation a
win for business leaders, otherwise they will forever perceive the issue as an IT resource constraint
problem, rather than a failure of enterprise leadership and execution.

The first step in making participation worthwhile for business leaders is to open their eyes.
Benchmarking historical IT spend against run, grow and transformation initiatives can present a
shock to the system that gets their attention.

In most enterprises, the bulk of IT capital spend is focused on day-to-day running of the business
— that is, new capabilities that make what they're already doing easier or more efficient but have
little impact on the future of the business. These might include improving the outputs of a data
warehouse or upgrading an ERP system. Although they may be rational investments from a
microperspective, from a macroperspective they're "nice to have." This "run the business" focus
often consumes up to 60% to 70% of all IT spend, thereby starving innovation and the investments
necessary to grow or transform the business. Business leaders are typically dismayed by this
simple, previously unexposed fact.

As shown in Figure 2, profiling the last two years of investment against these three spending
categories creates the opportunity to validate whether the target allocations are correct and, if not,
what they should be for each category. As planning cycles occur and future investments are
considered, categorizing investments in this way can help determine whether they move the
enterprise closer to or further away from an optimized investment portfolio. As a result, there will
typically be fewer projects, and those projects that are funded become significantly more important.
Their importance, in turn, drives a deeper participation in governance and greater willingness to
develop enterprise program management competencies.

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 Figure 2. A Simple, Initial Approach to Investment Portfolio Management

Current IT Investment Profile

Run Grow Transform

65% 25% 10%

Target IT Investment Profile

Run Grow Transform

40% 35% 25%

Source: Gartner (November 2013)

Assume the Mantle of Leadership

CIOs who find themselves in a position in which business leadership is unengaged in governance
and demands for new capability perpetually exceed supply must solve the problem themselves. The
first step in doing so is to answer the question, "What must IT bring to the table in order to execute
a given strategic initiative?" Once that question is answered, it is IT's responsibility to articulate
those strategic implications in business-oriented terms. At this point, many CIOs will respond, "But
we're already doing that, and our business leaders still don't care." This is generally a result of three
issues:

1. The implications are stated in technical, rather than business terms, so business leaders cannot
relate.
2. The impact of those implications on specific parts of the business are not articulated, so
business leaders don't see why they should care.
3. The opportunities for investment leverage are not exposed, squandering opportunities to do
more with less and drive change faster, and leaving business leaders believing there is no
personal benefit in acts of compromise.

There are two best practices for resolving this stalemate. The first is to state IT implications in terms
of their impact on leading business performance indicators (LPIs). The Gartner Execution Model
(GEM; see "Execute on your Strategy; Deliver Results: The Gartner Execution Model") is a tool for
accomplishing this. Populated by just IT, GEM provides a business-oriented view into what a given
business initiative will take from IT and what positive or potentially negative business implications
that will create. It also provides a nonthreatening example of how the rest of the business could
benefit from such an approach. Often, as with Hallmark (see Figure 3), business-focused, GEM-like

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 tools initially employed by IT are eventually adopted by the rest of the organization, creating the
infrastructure for enterprise-level program management.

Figure 3. Hallmark's Approach to Identifying IT's Strategic Impacts and Dependencies

External Trends
Migration Map
Workforce Implications

Technology Implications

Data Implications

Application Implications

Finance Implications

Executive Overview
IT Road Map map
IT Road

Source: Gartner (November 2013)

This soft-sell approach neutralizes much of the cultural resistance CIOs frequently encounter when
attempting to mature governance, because it clearly communicates that:

■ IT leadership understands the business and thinks in business terms.

■ IT is in a servant position to the rest of the enterprise and is not attempting to tell the business
how to run the show.

The second leadership best practice is to employ enterprise architecture practices. Call it anything
you want, but when done correctly, enterprise architecture translates what the enterprise is trying to
accomplish into various execution alternatives so that trade-offs can be examined and investments
optimized. In short, it feeds investment portfolio management. However, it goes one step further
and exposes how specific business or technological capabilities can support seemingly disparate
strategic goals and initiatives, creating the opportunity for leverage. Enterprise architecture then
becomes not about constraints, but about doing more with less and moving faster — two key
obsessions of business leaders (see "Gartner Defines 'Governance'").

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 Confirm Strategic Intent and Leading Performance Indicators
LPIs are measures the business uses to monitor progress against strategic intent. For example, the
enterprise's strategic intent might be to grow revenue. It may decide the best approach to doing so
is to improve sales force effectiveness, and it might choose to invest in new analytics capabilities or
sales force automation and mobility. The leading performance indicators associated with sales force
effectiveness might resemble the following:

■ Revenue per day, week, month, quarter, region, office, salesperson, customer or order
■ Orders per day, week, month, quarter, region, office, salesperson or customer
■ Products per salesperson, customer or order
■ Lead generation and hit rates
■ Pipeline effectiveness

The IT investments intended to improve sales force effectiveness should be justified and monitored
in terms of their expected impact on such LPIs. The LPIs then become the homing device used to
ensure all parts of the business are focused on the same definitions of success throughout the
execution process.

If the CIO is unfamiliar with or unaware of the LPIs the enterprise typically monitors, or if enterprise
strategic intent is not explicitly communicated in terms of LPIs, CIOs can use the Gartner Business
Value Model (see "The Gartner Business Value Model: A Framework for Measuring Business
Performance") and Risk-Adjusted Value Model (see "Toolkit: Risk-Adjusted Value Management
Workshop") to expose and validate the LPIs most relevant to a given strategic initiative.

Identify IT's Involvement and How It Potentially Impacts the Business

Validating what the enterprise is trying to achieve in terms of optimized investment portfolios and
LPIs is a critical step resulting in business-focused, measurable goals. It sets the target, but says
nothing about how the goal will be achieved from a change execution standpoint. Execution
requires an understanding of how all the moving parts associated with an initiative come together —
in other words, enterprise-level program management (see "Is Your Organization Ready for an
Enterprise PMO?").

As with Hallmark, CIOs can jump-start enterprise program management by making explicit IT's
underlying assumptions, prerequisites and dependencies for execution — especially those that
could impact other parts of the organization.

CIOs must state how IT expects to execute against contemplated investments before the
investments are made. Sales force mobility, for example, might imply one set of solutions to IT and
an entirely different set of solutions to sales or marketing. Making such assumptions explicit and
exposing their repercussions before investments are finalized are key to successful execution and
the only way to identify potential collisions across enterprise organizations early enough to resolve
them. The GEM toolkit also provides CIOs a method for capturing the IT implications of strategic

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 initiatives in business terms (using LPIs), exposing potential collisions before they occur.
Gartner.com provides several industry-based examples for how to use GEM.

Socialize
The strategic planning process in most enterprises involves C-level executives identifying a goal
and a high-level course of action that is then cascaded down to the various parts of the enterprise
that must execute. The initial goals may or may not be stated in terms of LPIs, which is problem
enough, but even more rarely are those LPIs translated into a cascaded set of metrics for
participating functional and operating units. These organizational units are left to interpret what the
strategic initiative means to them, based on their own constraints, biases and agendas.

No two parts of the organization are likely to have identical interpretations, making the odds of
derailment almost certain. This is why we see such abysmal success rates in strategic execution.
Prerequisites and dependencies are unexplored, and chosen alternatives are inconsistent. Their
incompatibilities are not identified until the enterprise is well down the path, causing collisions.
Organizational units are entrenched in their own approaches, causing reluctance to compromise.
Political posturing and strategic failure result (see Figure 4).

Figure 4. The Failure of Cascaded Strategies

Corporate ... that interpret ... and then ... leading to

strategies are them based on compromise siloed versus
passed down to individual goals based on local end-to-end
functional areas and perspectives tactical priorities performance
optimization.
The solution isn't less autonomy,
but integrated insights.

Source: Gartner (November 2013)

The most effective CIOs are focused on managing stakeholder relationships and driving business
value, leaving the day-to-day running of IT and its operations to trusted reports. There is no
substitute for face time with business leaders. The Gartner Business Value Model and program
management tools such as GEM arm CIOs and their designated relationship managers with the

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 business-focused insights necessary for building productive relationships across the enterprise and
facilitating early exposure of potential collisions, thereby improving execution.

Initially, these tools will expose IT's intended response to a given initiative and how that response
will affect both the entire enterprise and individual organizations within it across key domains such
as workforce, finances, business processes, technology and customers. The CIO who focuses the
conversation on what an initiative means to the business, rather than what it means for IT, will have
a more receptive audience and will obtain vital feedback for validating IT's approach or surfacing
potential collisions before they damage the enterprise.

Case Study
In "Case Study: Hallmark Bridges the Gap Between Enterprise Strategy and IT Execution," we see
how the CIO created a positive example that the rest of the business ultimately adopted and
followed. First, Hallmark IT established business-oriented views into the IT implications of each
strategy across key domains, such as finance and workforce (see Figure 3). The company then
socialized these domain views in a collaborative, outcome-oriented dialogue with each major
business stakeholder. Stakeholders found the process and supporting tools so enlightening that
they adopted them as their enterprisewide program management standards. While positioning only
IT's contributions to strategy in programmatic terms, IT illustrated for the rest of the business how it
might be done, improving IT's credibility and influence and maturing the enterprise's overall
capability for successful strategy execution through program management.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

"The Gartner Business Value Model: A Framework for Measuring Business Performance"

"Toolkit: The Gartner Business Value Model"

"Toolkit: Risk-Adjusted Value Management Workshop"

"Toolkit: Monetizing the Outcomes in the Business Value Model"

"Making the Case for IT Investments by Focusing on the Business Strategy"

"The Gartner Execution Model and IT Strategic Planning"

"How to Use the Gartner Execution Model in the Supply Chain"

"Case Study: Hallmark Bridges the Gap Between Enterprise Strategy and IT Execution"

"Toolkit: A Case-Based Example Using the Gartner Execution Model"

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 "Execute on Your Strategy; Deliver Results: The Gartner Execution Model"

Evidence
Kaplan and Norton estimate that fewer than 20% of enterprises successfully execute against
strategy. The Emerald Group found that only 10% to 30% did so, and other management experts
place the estimate of successful execution between 10% and 15%.

More on This Topic

This is part of an in-depth collection of research. See the collection:

■ How to Execute Against Business Strategy

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